The Scary Current High Tech IPO Market

In his Forbes.com column, Entrepreneurs: Walk, Don’t Run, To The Equity Markets, (03.14.07), Brian Hamilton, discussed the difference between today’s IPO market and earlier IPO markets.

As little as 20 years ago, Hamilton noted that companies that were going to issue stock generally had be profitable. A big difference between now and then, said Hamilton was that “Companies needed to show roughly four years of profitability before they sold shares to the public.”
Then, came the Dot.Com era, where profits did not seem to matter, noted Hamilton. Now, in the current era of IPOs, Hamilton describes that the IPO marketplace looks very much like the DOT.Com period that collapsed in March of 2000.

Intangible Knowledge Creates Profits

Profits today in most large corporations are directly related to some trade secret or intellectual
property that the company uses to produce a product or service. The main idea is that value
creation in today’s global economy is dependent primarily on intangible knowledge assets owned or
controlled by the corporation.
In the past, economists and policy wonks assumed that the natural order of events in the economy
would motivate corporations to add to their existing knowledge base. The hoped-for economic result
would be that corporate knowledge would “spill-over” to other organizations, eventually leading to social
and economic growth.
Profits from intangible knowledge would be plowed back into creating more knowledge, leading
to more economic growth. Or, so went the happy theory of perfect competition.

Those That Take You Out Of The Poop Are Not Necessarily Your Friends My favorite Russian proverb describes the dilemma of a injured young bird on the frozen Russian steppes. A Cossack finds the bird, and puts it in a fresh pile of Yak dung to keep it warm. Later, a hungry wolf comes by, hears the bird singing, finds the bird and eats it.
Like all good Russian proverbs, this one has 3 morals: Those that put you in the poop are not necessarily your enemies. Those that take you out of the poop are not necessarily your friends. And for heaven’s sake, if you are up to your neck in a pile of poop, do not start singing loudly.
In her story about the economic woes of Michigan, (Michigan Meets Tobacco Road as Toyota Goes South: March 7 Bloomberg), Doron Levin noted how the Democrats, traditional friends of the working classes, are not doing their friends in Michigan any favors.
“The fact that a majority of Democrats — and even a few Republicans — are willing to bestow more power on unions such as the UAW suggests that they don’t know, don’t understand or don’t care why Detroit automakers are in such deep trouble in their home market,” Levin writes.

Intangible Knowledge Creates Profits

Profits today in most large corporations are directly related to some trade secret or intellectual
property that the company uses to produce a product or service. The main idea is that value
creation in today’s global economy is dependent primarily on intangible knowledge assets owned or
controlled by the corporation.
In the past, economists and policy wonks assumed that the natural order of events in the economy
would motivate corporations to add to their existing knowledge base. The hoped-for economic result
would be that corporate knowledge would “spill-over” to other organizations, eventually leading to social
and economic growth.
Profits from intangible knowledge would be plowed back into creating more knowledge, leading
to more economic growth. Or, so went the happy theory of perfect competition.